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1NOW NEXT
May 2020
COVID-19: What to do Now, What to do Next
Responding to COVID-19How the forest products industry can navigate through disruption
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As governments make significant interventions in response to the coronavirus, businesses are rapidly adjusting to the changing needs of their people, customers and suppliers, while also navigating financial and operational challenges.
With every industry, function and geography affected, the amount of potential change to think through can be daunting. But turning massive complexity into meaningful change is possible and essential.
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For the forest products industry, COVID-19 is disrupting the entire value chain
To protect their people, organizations have implemented travel bans and restricted access to offices, mills, plants and timber plantations—and implemented work-from-home programs—all while examining how their workplaces operate and how people will function in a post COVID-19 world.
The impact varies widely by sector. Some mills and plants are experiencing shutdowns, while others are doing what they can to expand their capacity. But all are experiencing unpredicted events.
While the length and severity of the impact is unknown, we do know that it has scaled quickly and appears to be far from over. Leaders must prepare for the short term while also developing new capabilities and ways of working that will seamlessly enable longer-term changes to how they operate.
This document provides forest products leaders with a perspective on the evolving situation and implications for their businesses.
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The big picture: Key considerations for framing your response to the crisis
1. Be prepared 2. Operate safely and reliably 3. Scale back with intent
NOW • Stringently review outcomes of your emergency preparedness plan
• What went well and not so well?
• Prevent employees and contractors from coming in sick
• Manage entry with remote cameras and assess symptoms before workers come to a site
• Review fixed costs (leases, rentals, services, etc.) to understand options
• Reduce maintenance spend• Stagger shift schedules to reduce
personnel overlap
NEXT • Update preparedness plans, fill gaps and run simulations
• Adapt current actions to reflect new plan
• Increase social distancing in the workplace with connected worker technology
• Establish work practices that keep distance between people
• Shift more fixed costs to variable costs while maintaining flexibility
• Increase automation, utilize remote monitoring and leverage predictive analytics
NEW NORMAL
• Does the preparedness plan actually work?
• Was it a good plan, but poorly executed?
• Audit, communicate and practice often
• Create a network of virtual operation command centers
• Increase planning automation for maintenance and production scheduling
• Prioritize long-term resilience, which requires flexibility and a cost structure that can adapt to variable output
In the current environment, forest products companies need to respond immediately to varied demand and production challenges while laying out plans for the future. These actions fall into three categories:
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In forest products, no sector is immune—but some have stronger defenses
Forest products sectors are struggling to gather relevant demand information that captures the wild fluctuations that are occurring across markets.
The towel and tissue segment has seen unprecedented demand, but will customer use patterns truly change?
Packaging experienced drops due to retail closures, but it is showing a resurgence due to increases in home delivery. Will this surge continue throughout the year?
While the challenges differ by sector, building resilience is critical for all. Doing this now will help forest products companies weather the storm of future unpredictability that lies ahead.
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60
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D-4
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D-4
0
D-3
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D-2
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D-1
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D-1
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D-5
D-0
D+5
D+1
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D+1
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D+2
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D+2
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D+3
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D+3
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D+4
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Days before and after crisis breaks
Indu
stry
indi
ces
reba
sed,
Day
0 =
100
Graphic paper
Pulp
PaperPackaging
Crisis outbreak
Towel and tissue
Impact of COVID-19 on the forest products industry
Source: Accenture Research analysis of industry indices performance. Rebased day of outbreak (D0) = 100, and COVID-19 outbreak date = 21 Feb 2020. To construct indices, share price and market capitalization were sourced from Capital IQ.
What should be happening now?Actions that help mitigate near-term operational risks and protect your people
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Actions that should be happening nowUncertainty and disruption force quick action and many forest products companies have already risen to the challenge presented by COVID-19. Below is a comprehensive check list of suggested early actions to take.
Act now to define your culture and brand• Create and deploy a
responseroomcomposedof senior leadership
• Stand up cross-functional rapid response teams to deal with emerging challenges, consider participation of external parties such as suppliers, communityleaders and specializedconsultants
• Localize responses to communities in which youoperate, and include yourpeople and vendors
• Ensure information security monitoring for working from home
Ensure people are safe• Deploy innovative
strategies to protect your people
• Monitoryouractionsto ensure they are helping meet employees’ physical, mental and relationship needs
• Leverage remote operating centers and technology/mobile tools to further reduce on-siteworkforce
• Provideaccesstoneeded technologies and mobile tools to ensuremaximum productivity
• Be tolerant of initial inefficiencies, but do not compromise
Evaluate risks and opportunities and be ready to take swift action• Assess your current
financial position, looking at liquidity, capitalization strategy,revenueimpactof different scenarios,market valuation outlook, competitor positioning andrisks
• Update your strategic assumptionsto stay aheadof your competitors
• Mitigate risk and identify opportunities that may arise from marketvolatility
Reduce your operational exposure• Implement and deploy a
rapid-response supply chain task force
• Assessandaddresspotential supply chain disruptions
• Validate business continuity plans; engage suppliers, unions, communities and others
• Prepareto returnto normal, butplan fordisruptionsand delays
• Challenge your workforce to identify opportunities to reduce operational impacts
Manage the situation with passion and discipline• Keeptrackof the health of
your workforce• Monitor the sentimentof all
your stakeholders, including your suppliers andcontractors
• Continually assess internal and external indicators and have a mechanismin placeto act swiftly
• Developa ramp-upplanand update it on a regularbasis
• Developa risk assessmentand monitor itdaily
• Useapplied intelligenceto accelerate yourresponse
People and workplace
Operations and supplychain
Monitoring and reporting
Financial due diligence
Response Governance
What needs to happen next?Actions to capitalize on opportunities beyond the immediate future
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Actions that need to happen next
In the current climate, the decisions you make will determine how your organization fares in the near term, which is critical. But they will also have a significant impact on how well you operate in the future.This means that effective leaders should seize the opportunity to take swift action to avoid business disruption and potential revenue loss—and at the same time, forge new levels of trust with their workforce and position their businesses for greater resilience and productivity in the future.
Each company, industry sector and region will have different needs and requirements for managing people, the workplace, customer service, data management and business continuity. But there are five major foundations that all forest products organizations should consider as they move forward:
1. Embrace remote ways of working
2. Anticipate unpredictable demand
3. Figure out what to make and how to source it
4. Ensure inbound and outbound delivery
5. Rethink your assets
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Embrace remote ways of working What if…manufacturing sites remain on lockdown for the rest of 2020 with only essential employees allowed in or out?
1. Improve connectivity. Make sure that sites have good connectivity and key data sources are speaking to each other.
2. Invest in automation. Identify processes that could be automated to maintain physical distancing between employees.
3. Use augmented reality (AR). Explore how AR can help minimize personnel (including contractors) in manufacturing sites and increase the use of remote operations centers.
4. Clean up data. Ensure operational data is centralized and shareable. If there is opportunity to automate data flow and management, pursue it.
5. Upskill the workforce. Take advantage of downtime to train employees.
Tips and accelerators
Source: “Productivity in Uncertain Times through the Elastic Digital Workplace”, Accenture, 2020
These are uncomfortable times, and they provide an opportunity for leadership to engage differently, increase communication, connect with employees and show their support.
What is a North Star for ways of working? Embrace virtual work, upskill employees and automate workplaces for an elastic and digital future.
New workplace reality: elastic and digital
Culture andawareness
Elasticcollaboration
Virtual workenvironment
Seamlessnetworking
Distributedcontinuity
Adaptivesecurity
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Anticipate unpredictable demand
Forest products companies have started to adjust behavior in the short term. But getting fresher demand signals as inputs to the production planning process is a major challenge.
What is a North Star for unpredictable demand? Monitor information from new sources that have a current pulse on consumer demand, create end-to-end visibility and connect with the right partners to develop accurate demand sensing.
What if…sanitary wipes remain in high demand for the next three years due to the increased focus on cleanliness and widespread germaphobia?
1. Use social scraping. Identify non-standard sources of information to identify and monitor demand swells.
2. Augment decision-making. Prepare for things to change by building faster outputs using artificial intelligence and predictive modeling.
3. Build agility. Leverage a digital twin to create multiple manufacturing scenarios that deal with demand fluctuations.
4. Build buyer portals. Maintain transparent relationships with customers and understand their needs.
5. Remember sustainability. Continue to rethink what happens to single-use products at their end of life.
Tips and acceleratorsEnd-to-end demand visibility in action
Source: Accenture Strategy
5. Capture, sense and classify data
1.Anticipate and aggregate
demand
2. Concurrent planning
3. Supply ecosystem
polling
4.Fulfillment planning and execution
End-to-end planner
Digital engineer
6. End-to-end visibility and integrated business planning
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Figure out what to make and how to source itVarious types of volatility have destabilized demand signals and stability of supply across the forest products industry, including greater demand fluctuations for products such as toilet paper, unanticipated capacity constraints and limitations on the supply of raw materials due to chemical companies shutting down.
What is a North Star for sourcing raw materials? Companies need to be able to react quickly and minimize the impact of this volatility. One way to do so is with a supply chain control tower, which allows a company to manage the confluence of inputs to outputs.
What if…COVID-19 comes back with a vengeance after shelter-in-place orders are lifted, and the world returns to another period of social distancing?
1. Implement a supply chain control tower. Orchestrate the overall supply chain from sensing demand to delivery to customers.
2. Conduct simulations. Assess different scenarios for demand-profile modeling by using a digital twin.
3. Change product mix. Produce the right product for the right market to better meet demand (e.g. at-home vs. away-from-home toilet paper).
4. Increase real-time visibility. Use dashboards to track data as circumstances change.
5. Improve flexibility. Create relationships up and down the value chain to speed response in a rapidly changing environment.
Tips and accelerators
Supply chain control tower
Source: Accenture experience
Process execution
Root-cause, intelligence and rapid response
Real-time visibility
Externalrisks data
L3 execution
L2 analytics
L1 visibility
Disseminating information and
action plans
Monitoring execution
complianceContinuous
improvement
Root-cause analysis
Simulations, what-if-scenarios
Risk analysis andresponse
management
B2B integration
Root-cause analysis Alarms generation
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Ensure inbound and outbound delivery
Forest products companies are experiencing a range of complications across different modes of transportation due to country-to-country travel restrictions and a lack of available containers. Import and export to China has slowed, reducing the supply of process chemicals and demand for lumber and logs.
What is a North Star for inbound and outbound delivery? Companies can increase resilience by using data analytics to map transportation networks and ultimately by implementing autonomous logistics.
What if…trucking supply continues to decline through 2020 leading to scarcity of transport options?
1. Map supply networks. Leverage companies, networks and data sources to understand how supply is flowing through the network.
2. Create contactless handoffs. Minimize person-to-person contact by investing in RFID to track shipments.
3. Improve the pickup/delivery experience. Create a space that is sanitary and safe for drivers while they wait outside their trucks.
4. Adjust pricing. Incorporate freight rate changes into product pricing and manage discounts or promotions during high demand.
5. Partner with network. Engage with suppliers, distributors, retailers and customers to share transport, minimize less-than-truckload (LTL) shipments or ship direct to customers.
Tips and accelerators
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Rethink your assets
The COVID-19 pandemic is causing operational shutdowns, but some forest products companies are adjusting by shifting to production of essential medical equipment.
• Mondi Gronau is working to provide straps that will fit more than one billion nonwoven face masks, which are in increasing demand. The company is rapidly building up its capacity and volume by replacing rubber with soft elastic material that allows its machines to run quicker.1
• Smurfit Kappa has developed a series of workplace dividers to separate workers from each other to help prevent infection in various settings, including hospitals in Spain. It has also used corrugated boards for face masks, beds in temporary hospitals and other styles of temporary furniture.2
What is a North Star for your assets? Continue to work toward product innovation beyond the crisis, looking at more sustainable inputs and improving your ability to quickly pivot products.
What if…recycled paper becomes temporarily unavailable putting a strain on mill operations?
1. “Lean your mills.” Focus on efficiencies such as decreasing raw material usage (e.g. water, chemicals and fiber).
2. Invest in fast R&D. Design virgin fiber-based products to replace recycled cartonboard products (e.g. corrugated boxes for home food delivery).
3. Evaluate M&A opportunities. Consider new business opportunities to ensure supply capacity, increase access to new markets and leverage new technologies.
4. Increase inter-asset communication. Ensure that mills can meet new forecasted demand and stay open to support your needs.
5. Adjust pricing. Work with suppliers and buyers to adjust pricing to help keep operations afloat during this challenging time.
Tips and accelerators
New normalRevisiting ways of working and developing future strategies
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North Stars for the new normalThe COVID-19 crisis has created an opportunity to renew for the future—to strategically re-evaluate business models and be better prepared for the next “black swan” event. There are five North Stars for forest products companies to work toward in the longer term.
• Make data accessible in order to support increase in remote work programs
• Adjust employee work limitations for a more flexible and resilient workforce
• Shift some variable costs to automation, including: AI/machine learning, automated vehicles and increased use of conveyors, palletizers and stackers
• Capture data through new channels, such as social media
• Aggregate and analyze data through advanced analytics
• Respond to data insights with flexible operations
• Increase data points and data gathering to deliver the full picture
• Re-evaluate IT strategy (e.g. software, hardware, on/off shore, cloud, computers, cameras and as-a-service programs)
• Increase visibility across the supply chain through visualization
• Create action-based alerts to drive the management of materials
• Include more direct-to-customer shipping as part of the standard model
• Map supply networks• Work with retailers on
transportation logistics• Get to driverless
logistics where possible
• Increase resilience by competing in growing market sectors
• Reframe product sustainability, recognizing that the price of recovered versus single-use paper will fluctuate
• Increase flexibility to change product mix
Elastic and digital future
Demand sensing
Autonomous logistics
Product innovation
Controltower
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Food for thought
Product strategyHow might we adjust our product strategy for a more resilient future?• Will ecommerce see a
permanent step-change increase in volume?
• Did we cut out some SKUs during the crisis?
• What service changes made life better for our customers?
• What product changes improve resilience during a health-related event?
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The pandemic challenges us all to think differently and creatively. Below are a few questions to spark brainstorming on some hard topics.
Ways of workingHow might we grow virtual work models in order to: • Engage younger
generations in our workforce?
• Positively impact our employees’ work-life balance (commute time, childcare, etc.)?
• Reduce our CO2 footprint through less commuting?
Autonomous operationsHow might we leverage autonomous operations or remote operating centers to reduce operational safety concerns?• Which processes are more
suitable for remote operations management?
• How can wearables and hand-held devices be incorporated for operators and tradespeople?
CircularityHow might we reinvent our vision of circularity with health in mind?• Will cleanliness
specifications be updated to include disease-related topics?
• Will there be a shift to lock in more supply of virgin fiber?
• How do you “build back better,” leveraging investments to address climate change?
2 3 4
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References
1 “Mondi adapts production line in Germany to make much-needed face mask components,” April 3, 2020, Mondi newsroom. Mondi is a global leader in packaging and paper, contributing to a better world by making innovative, packaging and paper solutions that are sustainable by design.
2 “Smurfit Kappa launches portfolio of corrugated solutions to help communities affected by Covid-19,” April 9, 2020, Smurfit Kappa newsroom.
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Contact Us
David BurnsManaging Director –
Global Natural Resources LeadAccenture
Fredrik EngdarManaging Director –
Global Forest Products LeadAccenture
Amy CallahanManaging Director – North America
Chemicals & Natural Resources LeadAccenture
Special thank you to Michael Craig, Jason Malcolm and Lucyann Murray for their support in developing thisperspective.
To learn more about the Accenture Natural Resources industry group,visit www.accenture.com/naturalresources.
Accenture Natural Resources
To help our clients navigate both the human and business impact of COVID-19,we’ve created a hub of all of our latest thinking on a variety of topics.
Each topic highlights specific actions which can be taken now, and what to consider nextas industries move toward a new normal.
From leadership essentials to helping ensureproductivity for your employees and customer service groups to building supply chain resilience and much more, our hub will be constantly updated. Check back regularly for more insights.
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